South Africans 45% under-insured

According to market research by Santam, short-term insurance policyholders are under-insured by about 45% on average and are putting themselves at serious financial risk.

Santam Chief Executive Steffen Gilbert says, This means in terms of the insurance contract, a policyholder will only receive partial compensation after submitting an insurance claim.

Lets assume that the replacement value of a persons house contents is R200 000, but the sum insured is just R110 000 and during a burglary R20 000 worth of goods are stolen. Because he is under-insured by 45 percent, only 55 percent of the loss, that is R11 000, will be paid out.

No-one wants to come up with cash when they are experiencing a traumatic time. Underinsurance can put people under severe financial strain.

Gilbert notes that the problem is that most people fall into the trap of under-insurance because they are unaware of the main pitfalls.

Not insuring your assets at the correct replacement value is one of the main mistakes people make. The sofa that you bought five years ago for R1 500 might now cost R3 000 to replace. The contents of a house are insured at replacement value (vehicles are insured at market value). Therefore, you have to revise your policy at least annually to make sure that your cover remains adequate.

Also very important is for people to remember to insure the more arbitrary things too like curtain rods, curtains, bedding, loose carpets, books - in other words all your household goods an fittings.

Policyholders should also immediately add new purchases and gifts to their policy.

Gilbert concludes that you can either draw up an inventory yourself or employ the services of a professional broker who will be able to assist in valuation of house contents.

Once you've determined the accurate replacement value of your household items, you can ask your broker, or talk to Santam about amending your policy accordingly.